Anglo American, which has become a takeover target of BHP, will divest or demerge from its platinum, steelmaking coal and diamond businesses in its biggest shake-up in a generation, in a move that it hopes will appease shareholders.
The group said on Tuesday that it would demerge Anglo American Platinum (Amplats) “in a responsible and orderly way” to optimise value for both Anglo and Amplats’ shareholders.
Anglo owns nearly 80% of Amplats. The group also said it would divest from its steelmaking coal business, which was responding to “strong buyer interest”.
The London and Johannesburg-listed mining house will also divest or demerge De Beers “to improve strategic flexibility for both De Beers and Anglo”.
The group is also weighing options for care and maintenance and divestment from its nickel business, leaving copper as the jewel in its crown.
Anglo CEO Duncan Wanblad said the company had decided to simplify its portfolio and focus on its “world-class” resource asset base in copper and premium iron ore.
We see considerable opportunities for our employees, both in delivering the full potential of Anglo American and in the businesses that we will be divesting or demerging, all of which are high-quality businesses in their own right.
“These actions represent the most radical changes to Anglo American in decades. I believe these are the right decisions to position Anglo American to capitalise on the outstanding resource endowment opportunities within our portfolio today,” Wanblad said.
“Of course, we are conscious of the impacts of making such far-reaching changes, particularly on our employees. We see considerable opportunities for our employees, both in delivering the full potential of Anglo American and in the businesses that we will be divesting or demerging, all of which are high-quality businesses in their own right.”
Amplats’ shares initially plunged 10.4% following the announcement. The platinum major said in a separate statement that the company’s assets had “exceptional potential”. By market close, the share price was down the most since the day after the BHP offer was made public, down 8.64% to R717.20. It peaked in March 2022 at R2,525.
“Anglo American and Anglo American Platinum are working together to transform the company to generate multi-decade cash flows, high returns and delivering its full potential,” it said.
“The ongoing reconfiguration of Anglo American Platinum and associated employee consultation process, announced in February 2024, will continue and are not affected by this announcement.”
Anglo’s year to end-December results took a pounding from a plunge in the prices of platinum group metals (PGMs) and weak demand in diamonds, which resulted in the two commodities contributing to a $5.5bn drop in revenue.
This, coupled with weak demand for diamonds in the key markets of the US and China, led to Anglo writing down $1.6bn in De Beers’ value.
Anglo also impaired $500m in its Barro Alto nickel mine in Brazil.
The effect of poor performance in the PGM and diamonds businesses resulted in the group’s earnings before interest, taxes, depreciation and amortisation (ebitda) plummeting $4.4bn.
The group’s copper and iron businesses were star performers, contributing $7.2bn, or 72%, to ebitda. Amplats in February started a process likely to result in the retrenchment of 3,700 employees across its platinum mining business as it seeks to save R5bn in costs while reviewing contracts with 620 service providers.
Wanblad spoke tough in February, saying that nothing was off the table in the group’s asset review and that “there has to be a very clear value rationale for the asset to be in or out of the portfolio”.
Anglo has rejected two bids from BHP — the latest being a £34bn offer. BHP has not shown an interest in Amplats, and Anglo’s SA iron ore business, Kumba.
Anglo has opted to keep Kumba in its stable after the portfolio review.
“The announcement confirms that Kumba will continue to form part of the Anglo American group, given the proposed transformation of the Anglo American portfolio, which is designed to focus on world-class assets in copper, premium iron ore and crop nutrients,” Kumba said.
By market close on Tuesday, Anglo’s share price had fallen the most since mid-December, down 4.93% to R603.50. It is, however, still up 21.4% since the BHP offer, but well off its R830 peak in March 2022.
Update: May 14 2024
This story has been updated with comments from Amplats and Kumba, together with closing share price information.
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